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Sad State of Cyber Politics (Cato Policy Report)

Sad State of Cyber Politics (Cato Policy Report)

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Published by Adam Thierer
an essay by Adam Thierer of the Mercatus Center at George Mason University about the current state of cyber-politics. It highlights how many high-tech companies use government regulation to their advantage in the marketplace or to hobble their competitors and / or innovation.
an essay by Adam Thierer of the Mercatus Center at George Mason University about the current state of cyber-politics. It highlights how many high-tech companies use government regulation to their advantage in the marketplace or to hobble their competitors and / or innovation.

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Published by: Adam Thierer on Nov 19, 2010
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don’t know if it would make himsmile or grimace, but someone shouldgive T. J. Rodgers a prize for hispredictive powers. Back in 2000,Rodgers, the president and CEO of Cypress Semiconductor, penned a prescientmanifesto for the Cato Institute with a provocative title:
“The political scene in Washington isantithetical to the core values that drive oursuccess in the international marketplaceand risks converting entrepreneurs into sta-tist businessmen,” he warned. “The collec-tivist notion that drives policymaking inWashington is the irrevocable enemy of high-technology capitalism and the wealthcreation process.” Alas, no one listened. Indeed, Rodgers’sdystopian vision of a highly politicized digi-tal future has taken just a decade to becomereality. The high-tech policy scene withinthe Beltway has become a cesspool of back-stabbing politics, hypocritical policy posi-tions, shameful PR tactics, and bloated lob-bying budgets.
formerly president of the Progress andFreedom Foundation and director of telecommunicationsstudies at the Cato Institute, blogs at techliberation.com.
The SadState of Cyber-Politics
The riseof theTea Party 
Scholars onthe internationalstage
The Supreme Court,past, present,and future
n September the Cato Institute called President Obama to task for failing to honor his campaignpledge to “go through the federal budget page by page, line by line—eliminating those programs wedon’t need.” Full-page ads setting out hundreds of billions in budget cuts—cuts explained in greater detail at DownsizingGovernment.org—ran in major newspapers nationwide, including the
Wall Street  Journal 
, the
Washington Post 
, the
Los Angeles Times
, the
New York Times
, the
Washington Examiner 
, the
Houston Chronicle
, the
Dallas Morning News
, the
Minneapolis Tribune
, the
BurlingtonFree Press
, the
(Portland), the
Santa Barbara News Press
, the
Charlotte Observer 
, the
Baton Rouge Morning Advocate
, and the
Lexington Herald-Leader 
November/December 2010Vol. XXXII No. 6
Continued on page 6
Cato Policy Report
November/December 2010
Perhaps we shouldn’t find it surprisingthat so many players in the tech policy arena now look to throw each other under the BigGovernment bus to gain marketplace advan-tages. After all, that’s the story of many oth-er industries that got under the covers withWashington. But the sheer rapidity withwhich this sorry state of affairs has unfoldedin the tech policy world is shocking, even tothe most jaded among us.
Lest you think I am exaggerating, here’sa quick rundown of the cast of characters inthis Silicon-era soap opera and some of thesteamy plotlines:
In recent years, telecommunicationsand cable companies both asked theFCC to intervene to harm the other inthe
—skirmishes involv-ing marketing efforts to capture orretain consumers. Many years earlier,both sides advocated “open access” man-dates be applied to each other’s networkswhile insisting there was no reason suchregulations needed to cover their ownsystems.
But those physical infrastructure guyshave kissed and made up as part of theirunified effort to get the FCC to helpthem extract better contractual termsfrom the content creators and broad-casters for their video content. In the bat-tle over 
cable,satellite, and telco video distributorshave made an unholy alliance withtraditional regulatory advocates likePublic Knowledge and New America Foundation, asking the FCC to inter- vene in contractual disputes about pro-gram carriage and pricing. Rather thanfocusing on dismantling the many otherlegal privileges granted to broadcastersand programmers, video distributorsand regulatory advocates would insteadessentially force broadcasters and con-tent owners to cut deals they might notfind acceptable.
But the broadcasters don’t exactly have clean hands, either. They 
in an attempt to block theirstruggling satellite radio industry com-petitors (Sirius and XM) from merging.They’d
Congress andthe FCC to block those satellite opera-tors from offering competing local pro-gramming—an exercise in naked pro-tectionism. Recently, broadcasters
lawmakers to mandate that all cellphones and mobile devices include FMradio tuners. Broadcasters argue thisshould be required for “public safety”purposes, but it’s really just an attemptto hold on to fleeing audiences, even if there is little demand for such tuners orthe added cost such a mandate wouldentail for consumers. And then there’sthe broadcast industry’s long-standinglove affair with 
mandates,which abridge the property rights of  video distributors by forcing pay TV providers to carry channels they mightnot want (and which the public proba-bly doesn’t demand).
But broadcasters stand firm on theirown property rights. The spectrumthey’ve occupied for decades may beworth 
and they obviously don’t want anyone else get-ting their paws on it. But the wirelessindustry covets thy neighbor’s wife, or atleast the spectrum that is hers. It
—or even force—broadcasters to vacate their spectrum soit can be re-auctioned for other purpos-es, especially wireless broadband.
In the name of protecting copyright,many in the entertainment industry have called for various forms of techno-logical engineering—such as a mandat-ed 
to protect the trans-mission of high-definition video, orrestrictions on
which would allowconsumers to save shows on servers runby cable TV companies. Some also wantnetwork operators and digital de- vice makers to “do more”—potentially through force of law—to police their sys-tems for piracy or help ensure contentcan be monetized. Some news-gather-ing institutions also want other Internetintermediaries, especially search pro- viders, to help ensure that readers andadvertisers don’t abandon them entire-ly. Which brings us to Google.
Everybody—and I do mean every-body—wants Google dead, right now.Google currently serves as the GreatSatan in this drama—taking over therole Microsoft filled a decade ago—as just about everyone views it with a com-bination of envy and enmity. Of course,in a sense, Google had it coming. Thecompany 
in the push to impose “Net neu-trality” regulation on the Internet’sphysical infrastructure providers, whichwould let the FCC toss property rightsout the window and regulate broad-band networks to their heart’s content.Meanwhile, along with Skype and oth-ers, Google
on wireless net-works that would allow the agency todictate terms of service. It’s no surprise,then, that the cable, telco, and wirelesscrowd are firing back and now hintingwe need
to constrainthe search giant’s growing marketpower. File it under
Google had it coming in anothersense, having joined the decade-longeffort by myriad Silicon Valley actors tohobble Microsoft
Google has ham-mered Microsoft in countless legal andpolitical proceedings here and abroad.But revenge is a dish best served cold,and Microsoft now relishes its role as
The high-techpolicy scene withinthe Beltway hasbecome a cesspoolofbackstabbingpolitics, hypocriticalpolicy positions,shameful PR tactics,and bloatedlobbying budgets.
Continued from page 1
the ringleader of the rising Waron Google! Microsoft is
the same antitrust playbookonce used against them. Whether it’sthe legal battle over Google Books,Department of Justice reviews of vari-ous Google acquisitions, or other fights,Microsoft now stalks Google at every turn.
Finally, there’s the subsidy circus, withmore high-tech companies lining up atthe taxpayer-funded trough than ever.One
lambasts the waste, fraud, and abusethat runs rampant in America’s “univer-sal-service” system, which is supposedto guarantee that wireline telephoneservice be widespread and affordable. Just about everyone who wants a hard-wired phone has one these days, and Americans are “cutting the cord” fasterthan ever. And yet, those old govern-ment programs just keep growing.Many had hoped increasing wirelesscompetition would alleviate the needfor such subsidies. Instead, the wirelessindustry’s lobby is content to demand a subsidy system that
in typical ‘better-us-than-them’fashion: “In a competitive busi-ness like wireless, it’s not easy tosit idly by while your competi-tors tap into a new revenuestream. Nor is it consistent withyour shareholders’ interests.”
 And the High-Tech Pork Barrelis about to get a lot bigger. InMarch, the FCC released a 360-page 
(none dare call it an industrial pol-icy) that will invite even more of this behavior, with its calls for sig-nificant expansion of subsidiesfor the diffusion of broadbandservices. Amazingly,
claimingthat the bulk of the bill will be cov-ered by increased spectrum auc-tions. That’s nonsense, of course, and thescheme will only grow more expensive forconsumers in the long-run as more com-panies line up for handouts. Worse yet,the more checks government writes, themore opportunities it will have to exercisecontrol—subtle or blatant—over more lay-ers of the Internet and the speech thattravels over it.
Unsurprisingly, as a result of this inten-sifying political warfare, 
is now completely out of con-trol. “The [high-tech] sector doubled itsfederal lobbying effort in a decade from$185 million in 1998 to a record $377.5million in 2008,” 
the Center forResponsive Politics. “The biggest share of that increase came from the computer andInternet industry and the TV, movies andmusic industry.” Only the health care andfinancial/insurance/real estate sectors havespent more lobbying Washington in recentyears. Like other sectors, the recent reces-sion resulted in a slight downturn in techlobbying activity, but most expect thingsto return to normal shortly.According to
 National Journal 
, 4 of the top 20 spenderson federal lobbying in the first half of 2010were broadband companies. Although few Silicon Valley firms evenhad a D.C. office a decade ago, today legionsof their lobbyists descend on the Capitoland regulatory-agency hearing rooms eachday. House and Senate Commerce Com-mittee hearings on high-tech and media policy issues are packed like rock concertsand have lines out the door that stretch lit-erally around the buildings some days.
Perhaps weshouldn’t find itsurprising that somany players in thetech policy arena now look to throweach other under theBig Government busto gain marketplaceadvantages.
    T   o    t   a    l    L   o    b    b   y    i   n   g    S   p   e   n    d    i   n   g
 19981999 2000 200120022003 2004 2005 20062007 2008 2009
Lobbying & Political Spending by Communications & Electronics Sector
Source: Center for Responsive Politics.
November/December 2010
Cato Policy Report

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